IRS rolls out new tax withholding tables to align paychecks with tax law

Workers should soon see changes in their paychecks after the government on Thursday released so-called withholding tables explaining to employers how to align people’s paychecks with the new tax law.

The government also said it's developing a new W-4 form — which allows employers to adjust how much tax to withhold based on a number of factors — for the next tax-filing season.

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The administration is asking employers to implement the new tables by Feb. 15 so that workers will begin seeing the effects of the Tax Cuts and Jobs Act by next month.

The release comes amid warnings from Democrats that the administration could use the obscure tables to juice people’s paychecks this year, by withholding less from their pay, ahead of this year’s midterm elections. That could endanger the refunds people expect to get next year.

Treasury Secretary Steven Mnuchin called the charges “ridiculous” on Thursday and said the share of people receiving refunds should remain unchanged. He added that the IRS is working on a new withholding calculator so people can see for themselves how the changes would affect them.

“We wanted to make sure that people weren’t over-withheld or under-withheld,” Mnuchin said. “There won’t be a change.”

About 80 percent of taxpayers will get a tax cut averaging $2,100 thanks to the new law, according to the independent Tax Policy Center. About 5 percent will face tax increases averaging $2,800 while the remainder will see essentially no change in their tax bills.

Sen. Ron Wyden (D-Ore.), the top Democrat on the tax-writing Finance Committee, has asked the nonpartisan GAO to examine how the new tables will affect people’s withholding.

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“I look forward to GAO’s independent review of these tables, which will expose whether the Trump administration is tampering with Americans’ paychecks, resulting in a whopping tax bill next year,” he said in a statement Thursday.

Some people, especially those claiming a large number of allowances on their W-4, will be at risk of being under-withheld, which could leave them owing the IRS next year, said Mike O’Toole, senior director of publications, education and government relations at the American Payroll Association.

That’s because the GOP plan junks the concept of personal exemptions, which — along with the withholding tables — are used by employers to figure out how much to take from each worker’s paycheck. For taxpayers with only a few allowances, that’s offset by Republicans’ new, larger standard deduction, but not necessarily for those with more than four or five allowances, he said.

“It’s going to be incumbent on employees as individuals to check their withholding and make sure it will at least somewhat match their tax liability,” said O’Toole.

The end of those personal exemptions is a big reason why the government says it is developing a new W-4 form that will be released by the end of this year.